In 2002, online ad spending reached a low point. According to a new study from research firm eMarketer, companies spent only $6 billion on Internet ads that year, down from $7.1 billion in 2001 and $8.1 billion in 2000. "Even in the middle of the stagnant economy, total ad spendingincluding television, radio, print, and direct mailgrew 2.3 percent," says Geoff Ramsey, CEO and cofounder of eMarketer. "But online advertising was shrinking as much as much as 50.8 percent."

This year, things have changed. Online ad spending is growing at a rate of 4.8 percent, says eMarketer's report, right in line with the 4.9 percent rate the firm sees in the overall ad market. It will reach $6.3 billion by the end of the year and climb back to $8.1 billion by 2006, according to the study.

In the early part of the decade, says Ramsey, most traditional marketers had abandoned online advertising. "Not only was the overall economy going down and the overall advertising market going down, but there was a kind of continued backlash against anything related to the Internet," he explains. "Only the new breed of online die-hards was still advertising on the Web."

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But slowly, the mainstream advertisers have been won over again. "After major educational efforts and fairly significant improvements in the tools and techniques used to advertise on the Web," says Ramsey, "people are starting to come around." Many of these new tools and techniques, of course, have been driven by the widespread introduction of broadband Internet access.

Online ad spending is still only a small fraction of the totalcompanies will spend $248.25 billion across all media in 2003but all signs point to steady growth over the next few years. The Online Publishers Association says that in the first quarter, online ads at 24 of its member companies grew 40.7 percent from the previous year. PricewaterhouseCoopers and the Interactive Advertising Bureau say that even in the fourth quarter of 2002, revenues increased by 8.9 percent over the previous quarter. And these numbers should only swell as broadband becomes more prevalent. "Broadband only reaches 20 percent of homes today," says Ramsey. "There's lots of growing room."

Growth would be even greater, according to Ramsey, if not for a steady drop in ads sold by AOL. "AOL's market share continues to shrink in terms of online ad revenues," he says. "I don't think they rolled out their broadband service quick enough." But that's just one piece of bad news from the world of online advertising. The rest of the news is rather good.

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